Finance Problems in Investment over Periods of Time

You invest a single amount of $12,000 for 5 years at 10 percent. At the end of 5 years
you take the proceeds and invest them for 12 years at 15 percent. How much will you
have after 17 years?

Mr. Flint retired as President of the Color Tile Company but is currently on a consulting
contract for $45,000 per year for the next 10 years.

A) If Mr. Flint's opportunity cost (potential return) is 10 percent, what is the present
value of his consulting contract?

B) Assuming that Mr. Flint will not retire for two more years and will not start to receive
his 10 payments until the end of the third year, what would be the value of his
deferred annuity?

Ron Rhodes calls his broker to inquire about purchasing a bond of Golden Years
Recreation Corporation. His broker quotes a price of $1,170. Ron is concerned that the
bond might be overpriced based on the facts involved. The $1,000 par value bond pays
13 percent interest, and it has 18 years remaining until maturity. The current yield to
maturity on similar bonds is 11 percent.

Do you think the bond is overpriced? Do the necessary calculations.

Altman Hydraulic Corporation will invest $160,000 in a project that will produce the
follow cash flows. The cost of capital is 11 percent. Should the project be undertaken?
Use the net present value . (Note that the third year's cash flow is negative.)

Highland Mining and Minerals Co. is considering the purchase of two gold mines. Only
one investment will be made. The Austrailian gold mine will cost $1,600,000 and will
produce $300,000 in years 5 through 15 and $500,000 in years 16 through 25. The U.S.
gold mine will cost $2,000,000 and will produce $250,000 per year for the next 25 years.
The cost of capital is 10 percent.

A) Which investment should be made

B) If the Austrailian mine justifies an extra 5 percent premium over the normal cost of
capital because of its riskiness and relative uncertainty of flow, doe the investment
decision change?

A grandmother is looking for a plan to finance her new grandchild's college education. She has $25,000 to invest. Search the internet and locate a long-range investment plan, CD, Savings Bond, etc, for the grandmother. The plan is to earn compound interest.
Calculate the future value of the investment. You must use the adverti

If you invest $100,000 today at 12% per year over the next 15 years, what is the most you can spend in equal amounts out of the fund each year over that time.

3. You will receive $5,000 three years from now. The discount rate is 8 percent.
a. What is the value of your investment two years from now? Multiply $5,000 _ .926 (one year's discount rate at 8 percent).
b. What is the value of your investment one year from now? Multiply your answer to part a by .926 (one year's discount

Please see the attached Excel document for the question posed.
Thank you.
Problem 9-19 - Refer to problems at the end of the chapter for details and instructions:
Use the template to complete the problem :
Bruce Sutter
Discount Rate = i 20%
Periods = n 5 PV x FVIF = FV
Present Va

10. If a country's government imposes a tariff on imported goods, that country's current account balance will likely __________ (assuming no retaliation by other governments).
a. decrease
b. increase
c. remain unaffected
d. either A or C are possible
12. The U.S. typically has a balance-of-trade surplus in its trade with

An investment generates $10,000 per year for 25 years. If an investor can earn 10 percent on other investments, what is the current value of this investment? If its current price is $120,000, should the investor buy it?

1. If you require a 12 percent return on your investment, which would you prefer?
a. Present value of $8,000 today
b. Present value of $15,000 received in 5 years at 12%
c. Present value of a 15 year, $1,000 annuity at 12%:
Explain what is the best choice and why it is the best.

Need help with following problem:
A portfolio manager is being evaluated based on the time-weighted average rate of return. If the manager had achieved annual returns for the past three years of 2.5%, 14.5% and 9% on one initial investment of $500,000, what is the time weighted rate of return on the portfolio. (Round to nea

Consider a Poisson probability distribution with 2 as the average number of occurrences per time period.
a. Write the appropriate Poisson probability function.
b. What is the average number of occurrences in three timeperiods?
c. Write the appropriate Poisson probability function to determinate the probability of x occurren